Deutsche Boerse AG plans to sign up seven of the largest dealers, including Deutsche Bank AG and JPMorgan Chase & Co., to its new clearing service for over-the-counter interest-rate swaps as it seeks to compete with LCH.Clearnet Group Ltd.
Eurex Clearing, a unit of Frankfurt-based Deutsche Boerse, said it will enter into agreements with Deutsche Bank, JPMorgan, Barclays Plc, BNP Paribas SA, Citigroup Inc., Credit Suisse Group AG and Morgan Stanley. The new clearing service will be called EurexOTC Clear, the exchange said in a statement today. The product will be ready by the beginning of July and the exchange expects to roll it out in the second half of the year.
Regulators globally are pushing for more OTC derivatives to be processed by clearinghouses to reduce systemic risk. LCH.Clearnet, the largest clearinghouse for interest-rate swaps, and Deutsche Boerse’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.
The European Union plans to identify which derivatives must be cleared by the start of next year, through its European Market Infrastructure Regulation.
EurexOTC Clear “will integrate the clearing and collateralization of OTC and listed derivatives in a single clearinghouse under a single framework,” Peter Lenardos, an exchange analyst at RBC Capital Markets said in a note to investors. “Today’s news reaffirms our positive stance on the company and we are pleased that Deutsche Boerse is positioning its business to take advantage of regulatory change.”
The exchange holds an analyst and investor day tomorrow.
NYSE Euronext and Deutsche Boerse reverted to expanding their existing operations after the European Commission blocked their combination in February. Deutsche Boerse agreed to buy the operator of the New York Stock Exchange in a deal valued at $9.53 billion when it was announced in February 2011.